Another check is late, and once again, you're going to have to use your business credit cards to manage your cash flow.
Periods of slow to no checks can be maddening for any business, but it's especially so when you work for yourself.
Different business models feel this pain more than others. If your plumber came over and did work for you, it would be expected that you would pay that person on the spot. You wouldn't say, "Thanks for unclogging my toilet. I'll do you a solid and pay you back in about four weeks."
But with other businesses, it's very common to get paid in weeks, a month or whenever the client gets around to it.
If you're a part of that business dynamic, and you're waiting for a late check, you probably shouldn't take it personally. Sandi Webster, co-founder of women's empowerment platform Pandi, says she generally gives clients the benefit of the doubt.
“Usually, it's a cash-flow problem because they are waiting for a large check from a customer, or they're trying to make payroll," says Webster. (Full disclosure: Webster worked as an executive for American Express for 12 years, from 1989 until 2001).
But, still, whether there are good reasons or not for that late check, there are some things you can try to get it to you faster.
1. Follow up on your account receivables.
Don't wait too long to start asking for your payment. Sure, if it's been established that a corporation isn't going to pay you for 30 days, you probably shouldn't pester the accounting department on Day 11.
Actually, you should probably be thrilled if your accounts receivables do pay you within 30 days.
"An average payment term used to be 30 days and you could count on getting a check at least five days after that. Then the terms were extended to 60 days and now an average term is up to 120 days," Webster points out. "That means a small-business owner now has to carry payroll and expenses for four months."
(Insert nervous laughter here.)
There's nothing wrong with checking in with accounting early and making sure that they have the invoice you sent. With some clients, Webster adds, you may only feel comfortable inquiring about a check after four months. But if you get the round around—"Your invoice wasn't received, and you'll have to resubmit," and in theory, you could wait another four months—ask the person in accounting to put a rush on the invoice.
2. Automate your invoicing system.
Gregory Heilers, an Oakland, California freelance journalist and ghostwriter who owns G.P. Heilers Writing & Editing, says that he has had checks come in late as well.
“I've had this happen… oh, every pay period," he quips.
Heilers suggests investing some money into purchasing invoicing software that sends out automatic follow ups at one and two weeks. He also suggests putting a clause in your contract that says a 10-percent late fee will be added every time a payment in two weeks late.
These are all great suggestions, but ones Heilers admits to not actually following himself.
“All I really do is send polite one and two week follow ups, whether through PayPal or email, asking for my money," he says.
That's understandable. Freelancers tend to not want to be perceived as pushy with clients. There's absolutely nothing wrong with automatic, software-initiated follow ups. Just remember to be polite when following up if you want to continue working with the client.
That said, there's no need to be a doormat either. Heilers says that with regular clients, “if an invoice is more than two weeks late, I put a halt on any further work for that client, letting them know that I appreciate their business, would love to complete the assignments and hope they understand from a business perspective that I can't invest any more time in their account until I can be assured I will be paid."
It's a tactic that has been pretty successful for him, he says.
3. Use your business credit cards to help you out of a jam.
Think carefully about using payday loans or any small business loans; you may want to consider how their interest rates or windows of time for repayment may affect your business. And while business credit cards can't save you forever—you need those checks after all—they can be useful for working capital and to help manage cash flow.
Taj Tsonga is a solopreneur based out of New York City who works in production, often writing articles and producing videos and social media content for companies. Tsonga has used business credit cards to manage his cash flow.
Tsonga also submits his invoice immediately “in an effort to get ahead of the client's backed-up accounting departments."
He has also created a finance payment calendar.
If an invoice is more than two weeks late, I put a halt on any further work for that client, letting them know that I hope they understand from a business perspective that I can't invest any more time in their account until I can be assured I will be paid.
—Gregory Heilers, owner, G.P. Heilers Writing & Editing
“As soon as I am contracted to work on a project, I insert the production timeline's key dates into my financial payment calendar," Tsonga explains. "I will then calculate when I can submit my invoice and set an alarm to alert me the day of invoice submission."
Along with that alarm, he also sets alarms for following up on invoice submissions. He turns them off once the payment has been deposited into his checking account.
4. Be relentless.
As the owner of her former company Consultants & Go, Sandi Webster has worked with more than a few companies that didn't pay up for services rendered.
She's called businesses that owe her money from different phone numbers (so Caller ID wouldn't show it was her calling), has written strongly worded letters and, yes, she has hired collection agencies and taken ex-clients to small claims court.
Webster has had luck in showing up in person at their place of business. While that probably isn't feasible if your client is halfway across the country, it can work if you happen to be in the neighborhood, Webster says.
“They usually cut the checks right there," she says. “Most small-business owners are embarrassed when you show up and will tell you that they just don't have the money to pay right now."
Webster also informs her clients who have trouble paying on time that they can use their business credit cards to pay her. If they can't pay the whole amount, they can do an installment plan.
Chasing down late payments isn't fun, but don't feel guilty—you've earned that money and deserve to get paid.
Read more articles on accounts receivable payable.
Photo: Getty Images
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